After a very busy January, when some of us believed that a world war could follow Iranian general Soleimani’s death, when all of us saw the US and China finally signing the “phase one” trade deal, and when the entire world started fearing the coronavirus outbreak, here we are already in mid-February.
For us here in Brazil, it is time now to wonder how many acres the US farmers will plant with soybeans in their 2020/21 crop, after the significant cut to the planted area seen last year, and to take a closer look to the South American 2019/20 crop, which is being harvested.
For Brazil, the 2019/20 soybean crop started with many problems. The spring rains, which are crucial for the beginning of the planting season, arrived later than normal and were very irregular in several states until November and, in some areas, until December. After that, however, weather conditions dramatically improved.
Despite the delay (or maybe because of it), the crop has a huge potential and farmers are reporting very good yield prospects in most of the country. By Feb 6, 16% of Brazil’s total soybean area had been harvested, according to a weekly survey conducted by AgRural. That compares to 26% in the same period a year ago, when Brazil had its fastest planting and harvest pace in history, and 15% on the five-year average.
Although there is some concerns in Rio Grande do Sul, the country’s southernmost state, where harvest starts only in March and some regions have been dry now in February, Brazil is headed for a record soybean crop, with a production that is likely to surpass the 125 million metric ton mark for the first time. That is 10 million metric tons more than last year’s production, when areas planted too early were damaged by dry conditions in December.
Paraguay and Argentina
And it is not only Brazil. After a crop failure in 2018/19 and a delayed planting in the fourth quarter of 2019, Paraguay, the world’s number four soybean exporter, is harvesting a very good crop, which will surpass 10 million metric tons. And Argentina, where weather conditions were not exactly flawless until mid-January, is now in very good shape. If things don’t change much over the next four weeks, the country will probably be able to harvest something around 55 million metric tons, repeating the good performance seen last year.
That means that South America is likely to produce about 12 million metric tons more than a year ago, which might result in more bearish pressure on international prices. Speaking of international prices, another hot topic in the first months of 2020 will be the export pace.
In January 2020, Brazil shipped 1.488 million metric tons of soybeans, 27% down from the same month in 2019. China was the destination of 73.7% of that total, its smallest share for January since 2015. Was that a result of the “phase one” trade deal with the US or the delayed harvest in Brazil? Probably both. But February looks good, with line-ups showing about 7 million metric tons, compared to 5.3 million a year ago. And China has been buying more for delivery in the next three months, despite the deal with the US and the coronavirus. Let’s see what happens next.